In these challenging economic times, more and more individuals are turning to self-employment as a source of income. If you are thinking about this as a possibility, really think about it. It is easy to have your good idea turn into a nightmare.

There are three levels of business scale to think about as you consider moving forward with self-employment plans.

Part-time Operation - typically hobby or craft based to provide supplemental income

Life-style / Home Based - this could represent part-time or full-time employment

Full Scale Business Development - with full-time employment commitment

With a full time life-style or other type of full time venture development, you need a business plan and a carefully thought out strategy. Most would recognize the importance of such a decision and the commitment that must accompany such a choice. To an important degree, the same requirement of commitment and planning is true for a part-time operation as well. Unfortunately, all too often, people decide to use a part-time operation to provide some supplemental income, but do not consider the full impact of the decision they are casually making.

Part-time self-employment provides an opportunity to earn additional revenue to supplement the family income, to work with the continuation of public benefits such as unemployment, SSI, SSDI and TANF, and/or to be productively engaged but not able to sustain a full-time work schedule. Typically, you would be making use of a craft, hobby or skill.

Clearly, the list could go on, but it is useful as examples and a trigger about what you might be interested in pursuing. The main point is that the venture is not being looked to as primary support for yourself or your family.

Even though the business activity is not a primary source of income, there are still important concerns:

You make sure that you at least cover all of your costs

You are not incurring increased overhead

You can sell whatever to someone

Covering your costs - Strange as it may seem, many hobby or craft-based businesses don't have the faintest idea of their costs and so don't have the faintest idea of what they should charge.

Not increasing overhead - If this is a true part-time home-based business, you should not need to rent additional space or obligate for expenses such as additional phone or Internet services. If you are, then this moves you into the "Life Style Home Based Business" category where you now have regularly reoccurring costs that must be covered whether you do any business or not. This creates the issue of breakeven, and so creates a minimum level of business you must maintain (whether or not you feel up to it on any given day).

Can you sell to someone - This is the really interesting question - Can you sell whatever it is that you are going to produce or provide? If it is whirligigs, can you actually sell them off of your lawn? Could you make a deal with a local craft store to sell them on consignment? If you put an ad in the local paper, you are now incurring additional costs - which mean additional sales just to meet this cost. The list goes on.

There are other issues to consider. A local farm stand has been in operation for multiple generations. In addition to their produce, they sold (very delicious) fruit jams and preserves. Recently they stopped offering these jams and preserves. They shared that new state regulations now required certain minimum kitchen standards that they were unwilling to incur the costs to meet. Does your product or service have any such requirements? Maybe not, but you certainly should check it out.

Another consideration is inventory levels that you may need to maintain. If you are making whirligigs, can you purchase very small quantities of material to make one or two whirligigs, or do you need to purchase full sheets of wood, cans of paint and other materials in greater quantities? It may be that this is the only way you can purchase the materials you need, or that purchasing in very small quantities is just too expensive relative to the price you can charge for the finished product. Can you afford to purchase the needed quantities?

Do you have the equipment you need - and is there a maintenance cost to the equipment once you start using it more? Do you already own a band or jig saw that is powerful enough to make enough items to sell? If not, do you have to buy one? How often do you have to replace the blades? Do you have some form of dust collection system? Ambient sawdust is a fire hazard.

You need to think your way through the process.

If you were getting ready to bake a cake and were using a good recipe, you would be provided with a list of required items: mixing bowls, measuring scoops, pans, an oven, and other such items. You also would have a list of the actual ingredients and how much of each you need.

You may think that the pattern of your whirligig is the recipe - true, but only part of the recipe. You need to make a list of the rest as well:

Equipment needed - saw, blades, paint brushes

Minimum supply inventories - wood, paint (how much of what)

Space for production and to store inventory

Next, you need to establish your costs. How much does it actually cost to make one whirligig? Here you have to consider waste as well as the actual material you use directly. If you buy a sheet of plywood, how many parts can you cut out of it? The price of that part is the cost of the whole sheet divided by the number of parts it can provide. This is true as long as you don't make any mistakes.

Whirligigs are on one end of the spectrum. Another could be making custom sail boats. This is the same equation - just more details. In any event, the essential goal is to make sure that you are at least covering your costs.

On to the selling question! You now know how much it costs to make the products and so therefore you know that you must price it at least at that amount. You have actually made some of these and so have a number in the garage or your cellar. How are you going to sell them?

You may decide to sell a few whirligigs off the front lawn. Do you have any traffic past your house? Who is going to be available to complete the sale and take the money?

We noted earlier that you might make an arrangement with a craft or variety store to sell the whirligigs on consignment. If you take this route, the price must increase sufficiently to pay their commission as well as cover your costs. Do you know how much that has to be? How does the new price compare with other such products? The boat builder maintains a website and accepts custom orders - one at a time, so that he doesn't have more orders than he can make.

It's very interesting - making a few whirligigs and selling them off the front lawn sounds like a good way to make some additional income. But, if you are going to the trouble to do this, make sure that you are at lease covering your costs!

Following is a worksheet to help you start your thinking.

Think It... Plan It... Before You Do It

Business Idea Worksheet

Here is a simple worksheet to help you start to frame your part-time business idea - just list your ideas as they pop into your head. If you don't know the answer, don't worry - more details will be covered in later sections. You can come back later and add information that you do not presently have, but this is a great way to get started. Complete the worksheet and discuss it with your spouse, counselor or mentor. Talking about the ideas with someone else helps to see if they really make good sense.

Please fill in questions proceeded by a double asterisk and marked in red

1. What are you going to sell? Describe the product or service

2. How much does it cost you to make/provide the product or service

3. Do you have the equipment you need? What happens if the equipment breaks down? How much will it cost to get it fixed?

4. Do you have the space to store the materials, work in process, and finished goods?

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